Tablet Demand Cools, Phablets Eat Into Sales

For tablets, what a difference a year makes. A hot item during the 2013 holiday season, demand cooled off dramatically in the first quarter as so-called phablets ate into sales.

Phablets -- smartphones with screens five inches or larger -- have grown in popularity, largely thanks to devices like Samsung's Galaxy devices.

Worldwide tablet shipments in the first quarter fell 35.7% from the fourth quarter, while increasing just 3.9% from the year-earlier period, according to a new IDC report.  The slowdown ran across all operating systems and screen sizes and signals a bumpy year ahead for the category.

An indication of the pullback came when Apple last week reported that iPad sales fell 16% in the last quarter to 16.3 million even as iPhone sales increased 17% to 43.7 million. Apple partly attributed the drop-off to unusually strong first-quarter sales in the year-earlier period rather than a disappointing first quarter in 2014.

IDC itself last year predicted slowing demand for tablets this year, from 53.5% in 2013. But the first-quarter decline was larger than expected.

"The rise of large-screen phones and consumers who are holding on to their existing tablets for ever longer periods of time were both contributing factors to a weaker-than-anticipated quarter for tablets and 2-in-1s," said Tom Mainelli, IDC program vice president, devices and displays. He added that business demand for tablets had not been enough to offset the drop in consumer shipments.

Apple is still the world's largest tablet seller, with 32.5% share, but it continues to lose ground to Samsung and other manufacturers. The Korean electronics giant increased its share to 22.3% from 17.2% a year ago, working “aggressively with carriers to drive tablet shipments through attractively priced smartphone bundles,” according to IDC.

Rounding out the top five tablet makers in the first quarter were ASUS (5%), Lenovo (4.1%) and Amazon (1.9%). Shipments of Amazon’s Kindle Fire device, however, were down 47% from a year ago, while its market share fell from 3.7% to 1.9%. Overall, however, Android-based devices make up roughly two-thirds of tablet shipments.

Mainelli said it’s possible that IDC could reduce its forecast of 22% tablet growth this year, based on the first-quarter results, but the research firm is still working on the full historical data. “We’ll turn our attention to the full forecast in a few weeks.”

Tablet penetration among U.S adults is estimated at 42%, according to a Pew Research survey released in January, up from about a third a year earlier.

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